The past three years have seen corporate earnings rise inverse to the total return of indices as liquidity has outweighed all other factors, but 2020 may mark a turning point, according to Sebastian Lyon of Troy Asset Management.
Global corporate earnings grew by 7% in 2018 and fell by 3% in 2019, according to MSCI, while the MSCI World index fell in 2018 by 9% but rose by 28% in 2019. Meanwhile, the FTSE All-Share fell by 9% in 2018 and rose 19% in 2019. Reflecting on this in a letter to investors, Lyon said: "bad news is good news". BoE: Fund liquidity mismatches could 'amplify shocks in the financial system' However, while even "geopolitical risks are frequently ignored by investors", 2020 could see an end to this "perverse environment", as coronavirus and the US Federal Reserve's change in direction have "...
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